U.S. Accuses Google Of Corrupting Competition In Digital Advertising

The U.S. Justice Department filed a lawsuit against Alphabet's Google on Tuesday over allegations that the company abused its dominance of the digital advertising business.

"Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies," the government said in its antitrust complaint.

The Justice Department asked the court to compel Google to divest its Google Ad manager suite, including its ad exchange AdX.

Google said the lawsuit is "doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow."

The lawsuit is the second federal antitrust complaint filed against Google, alleging violations of antitrust law in how the company acquires or maintains its dominance. The Justice Department lawsuit filed against Google in 2020 focuses on its monopoly in search and is scheduled to go to trial in September.

Eight states joined the department in the lawsuit filed on Tuesday, including Google's home state of California.

Google shares were down 1.6 percent on Tuesday.

The lawsuit tackles a critical business at Google that is responsible for 80 percent of its revenue and represents the latest swipe at Big Tech's market power by the administration of U.S. President Joe Biden, a Democrat. The 2020 lawsuit was brought during the term of Biden's predecessor Donald Trump, a Republican.

The lawsuit says "Google has thwarted meaningful competition and deterred innovation in the digital advertising industry, taken supra-competitive profits for itself, prevented the free market from functioning fairly to support the interests of the advertisers and publishers who make today's powerful internet possible."

'PROJECT POIROT'

While Google remains the market leader by a long shot, its share of the U.S. digital ad revenue has been eroding, falling to 28.8% last year from 36.7% in 2016, according to Insider Intelligence.

The Justice Department asked for a jury to decide the case, which was filed in the U.S. District Court for the Eastern District of Virginia.

The lawsuit lays out a number of Google's attempts to dominate the advertising market, with the government arguing that the company has the "tech tools to quash the threat." The complaint discussed header bidding, which was a way that companies could bypass Google to bid on ad space on websites.

It lays out a series of projects including one dubbed "Project Poirot" named after Agatha Christie's master detective, Hercule Poirot. The project "was designed to identify and respond effectively to ad exchanges that had adopted header bidding technology."

The 149-page complaint said Google doubled down after Project Poirot's initial success in manipulating its advertisers' spending to reduce competition from rival ad exchanges. Rivals AppNexus/Xandr lost 31% of DV360 advertiser spending, Rubicon would lose 22%, OpenX would lose 42%, and Pubmatic would lose 26%, the complaint said.